According to published news reports, the Australian government plans to “introduce draft legislation that will attempt to force technology companies to break into end-to-end encrypted messages.”

Of course, there’s an irony in attempting to compel tech companies to compromise end-to-end encryption, which is designed to ensure that messages are encrypted at the sender’s device and remain in that state until they are decrypted at the recipient’s device. This means that even if a message is intercepted as it travels through servers controlled by the tech company that designed the messaging system, it is gibberish unless the interceptor can come up with the decryption key.

Modern encryption is extremely strong, so brute force attempts to find a decryption key by random guessing don’t work. The number of possible keys vastly exceeds the number of guesses that even today’s fastest computers can make in a reasonable time frame. As a result, intercepting an encrypted message and then trying thousands, millions, or billions of random keys to try to decrypt it is, mathematically speaking, an exercise in futility.

When a reporter asked Australian Prime Minister Malcolm Turnbull, “Won’t the laws of mathematics trump the laws of Australia?,” Mr. Turnbull reportedly responded “Well the laws of Australia prevail in Australia, I can assure you of that. The laws of mathematics are very commendable, but the only law that applies in Australia is the law of Australia.”

Actually, the laws of mathematics, including the mathematical framework that enables strong cryptography, apply in Australia and in every other country. The laws of mathematics can’t be undone by wishing they didn’t exist, or by legislating them away.

The laws of mathematics, including the mathematical framework that enables strong cryptography, apply in Australia and in every other country.

This calls to mind a bill introduced to the Indiana General Assembly in 1897 relating to the relationship between the circumference and diameter of a circle, which is characterized by pi, an irrational number frequently expressed in rounded form as 3.14. The 1897 “Pi Bill” asserted that it was “introducing a new mathematical truth” and that “the ratio of the diameter and circumference is as five-fourths to four.” This ratio corresponds to a value of pi of 3.2 as opposed to the correct value of (in rounded form) 3.14. While the Pi Bill unanimously passed the Indiana House, fortunately for everything circular in the world, it never passed the Indiana Senate and therefore never became law.

Well over a century later, legislators are once again grappling with mathematics, this time in the context of encryption. Governments, including Australia’s, are properly concerned that encryption can be used to mask criminal activities. For years—decades in fact—governments have been trying to figure out how to come to grips with this issue. Over that time span, encryption technology has advanced significantly, and the proliferation of messaging apps with end-to-end encryption has put strong encryption within easy reach of anyone with a smartphone. When these apps are used in furtherance of unlawful activity, governments have a right to be concerned.

But any policy solutions need to be developed with a clear understanding of the realities, mathematical and otherwise, that relate to encryption. Brute force decryption of intercepted messages won’t work because the number of possible keys is too large. Technologically speaking, a government could try to mandate the creation of a “back door” enabling it to either access decryption keys or to access messages at the endpoints in their unencrypted form. But as the 1990s Clipper Chip debate made clear, this would raise important civil liberties concerns, and in any case the market would quickly respond. The apps with back doors would be discovered, and many people would migrate to apps with no known back doors, and to apps designed to operate in a decentralized manner so that messages don’t all pass through servers controlled by a single entity.

There is also the challenge of extraterritoriality. How, for example, would a government stop people from using apps designed in countries where it has no jurisdiction? Finally, there’s the key point that, viewed from the standpoint of cybersecurity, encryption is enormously beneficial. Government attempts to undermine encryption would also undermine cybersecurity.

The intersection of encryption and law enforcement, in short, is very complex and getting more so as more people communicate using systems that use end-to-end encryption by default. The solutions won’t be easy, and they certainly won’t work if they are premised on the belief that legislation can overrule mathematics.

Global advances in access to and usage of formal financial services among underserved populations, driven in part by the proliferation of innovative digital financial platforms and services, amplify opportunities for individuals to enhance their financial well-being and contribute to broader economic growth. Yet global progress toward financial inclusion also raises important questions about the security of the financial ecosystem. After all, those who are most likely to be underserved by or excluded from the financial system—including low-income individuals and women—often stand to be the most adversely affected by financial losses associated with cybercrime.

To facilitate dialogue surrounding these questions, the Brookings Financial and Digital Inclusion Project (FDIP) team hosted a roundtable in February 2017 that explored the intersection of cybersecurity and financial inclusion. This roundtable provided an opportunity for a diverse array of public sector, private sector, and civil society representatives to discuss key cybersecurity challenges and opportunities within the digital financial ecosystem and explore possible pathways for policymakers, regulators, financial service providers, nongovernmental organizations, and other stakeholders to help strengthen the state of cybersecurity within the global financial landscape.

Below, we highlight key themes that emerged during the conversation and identify possible next steps for the financial inclusion community with respect to bolstering cybersecurity.

Exploring linkages between cybersecurity, financial inclusion, and other considerations

Cybersecurity solutions within the financial sector and anti-money laundering/combating the financing of terrorism (AML/CFT) controls aim to advance the security, stability, and integrity of the financial system. A secure and resilient financial ecosystem helps foster consumer trust, which serves as an important condition for many individuals’ willingness to engage with formal financial services. Financial inclusion initiatives can help facilitate access to and usage of these services among those at the margins of, or outside of, the formal financial ecosystem. These efforts to advance the adoption of regulated formal financial services and products help enhance transparency with respect to consumers’ financial activities, which in turn contributes to AML/CFT’s objective of promoting financial integrity.

Verification and authentication processes are important components of AML/CFT controls. Digital identity initiatives that leverage biometric information, including the Aadhaar program in India, are one example of a mechanism that can help support these processes. However, digital identity initiatives also raise important questions surrounding consumer privacy and the vulnerabilities associated with centralized repositories of sensitive personal information. For more information about the issue of digital identity as it pertains to financial inclusion and financial integrity, read this post from a previous FDIP roundtable.

Advancing proportionate AML/CFT approaches and proactively investing in cybersecurity measures can help attenuate the possibility of cybercrime. However, even when preventative mechanisms are in place, the risk of fraud, cyberattacks, and other forms of financial crime remains. Robust consumer protection frameworks are a key component of successful financial inclusion environments, in part because they help mitigate the consequences of these risks and support consumer confidence in, and engagement with, the formal financial ecosystem.

From a technical perspective, outdated and centralized systems that may be vulnerable to attack pose a significant challenge for the cybersecurity community. At the same time, newer technologies such as blockchain are not exempt from cybersecurity threats such as hacking. Several participants at the roundtable raised concerns that regulators and financial service providers, including nontraditional entities that have emerged with the rise of FinTech, often neglect to adequately invest in cybersecurity measures. There are a number of possible explanations for this problem, including budget constraints, competing policy priorities, unwillingness to draw attention to cyber threats, and a lack of awareness surrounding cybersecurity issues.

From a financial inclusion perspective, other participants expressed concerns that elevating conversations surrounding cybersecurity within the financial inclusion community might actually have a chilling effect on some customers’ willingness to engage with digital financial services. The rationale underpinning this concern is that the term “cybersecurity” might sound sufficiently alarming to diminish consumer trust in and engagement with these services, particularly among individuals who have limited familiarity with the formal financial sector. Some participants also suggested that pivoting the conversation from cybersecurity to consumer protection and fraud prevention more broadly would help shift the focus from banks to a more inclusive representation of digital financial service providers.

Ultimately, participants agreed that while there is a certain amount of risk inherent in the use of any financial product or service, customers should be encouraged to evaluate that risk in light of the benefits afforded by financial tools. For example, in order to use a credit card online, customers must provide all the information a malicious actor would hypothetically need to defraud them—and yet, for many individuals, the advantages of accessing credit through this platform far outweigh the risks.

Strengthening cybersecurity moving forward

Participants generally agreed that the issue of cybersecurity merits greater attention from financial service providers, customers, and the regulatory community. Below we identify four possible action items for these stakeholders to consider in their efforts to foster a secure, stable, and inclusive financial ecosystem.

Enhance technical assistance. Amplifying technical assistance for public and private sector stakeholders within the financial inclusion ecosystem—including regulators, policymakers, and financial service providers—would help equip these entities with a greater understanding of key cybersecurity pain points and best practices.

Advance consumer protection frameworks and financial capability initiatives. As noted in the 2016 Brookings FDIP report, developing and implementing robust financial consumer protection frameworks is a key dimension of financial inclusion. Other mechanisms for helping protect consumers include promoting financial education and capability programs that equip customers with information about the risks and opportunities associated with different products and services, as well as training on ways to securely manage them.

Consider the use-cases and technologies involved. When developing cybersecurity guidance and solutions, stakeholders must consider the full spectrum of technologies and applications deployed by relevant market segments. For example, while smartphone penetration and mobile broadband network coverage continue to gain momentum, many underserved individuals are still relying on older technologies (e.g., 2G networks). Cybersecurity solutions must be tailored to these varying circumstances accordingly.

Facilitate knowledge sharing across sectors. Given the proliferation of diverse entities situated at the intersection of finance and technology, fostering dialogue between traditional and nontraditional financial service providers, regulators, and policymakers is critical for determining how to best cultivate a secure and inclusive financial system. This dialogue could inform the development of a “menu” of policy options aimed at sustainably strengthening cybersecurity. Moving forward, determining what type of entity (or entities) would be best positioned to lead the development of such a menu could be a helpful next step for the financial inclusion community.

“To set the stage of where we are in global health right now, there is this ‘perfect storm’ that has been coming for a while,” observed Loyce Pace. “The first part of that is the burden and how the burden has shifted over time due to the epidemiological shift making it harder to reach hard-to-reach populations … and the other elephant in the room is the ‘money,’ the funding, and, finally, there is the political landscape,” she stated. How to address these glaring problems: prioritizing the private sector and public-private partnerships (PPPs). “Private sector investment and public-private partnerships don’t just make people feel good—they make sense,” Pace indicated.

Amanda Glassman added that “it is a useful exercise to try to connect health system governance to domestic and foreign private investment in health.” The necessity for such projects stems from the need to increase private investment in health. Aid—and especially public aid—has been slowing, so methods for boosting private investment are increasingly necessary. Glassman mentioned the Addis Ababa Financing for Development Conference’s goal of ‘billions to trillions,’ noting that “the vast majority of those funds are supposed to come from the private sector.” Glassman also asked, “How much is governance a driver of private investment?” and recommended further research on the connection between governance and private sector investments in global health research and development.

Ambassador Vinh spoke on behalf of Vietnam, the country that had the highest overall HGCI scores of the 18 countries considered in our index. “We need the grass root services, which are especially important in Vietnam, because we have urban areas, as well as the mountainous regions,” stated Ambassador Vinh. In order to attract private investors, he recommended improving legal, regulatory and human resources. Ultimately, he acknowledged that “Even though Vietnam ranked so high, at the same time we have a lot of challenges.”

The next report in our six-part project will focus on trends in health spending flows. Global health funding, particularly from the public sector, has not changed significantly since 2010. Competing priorities between communicable and non-communicable diseases also impact funding flows. Increased need in a time of insufficient resources, changing allocation of the available capital, and shifting disease burdens corroborate Loyce Pace’s observation of a “perfect storm” in global health R&D.

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Private investment in health R&D by pharmaceutical companies, charitable foundations, and venture capital firms, among others, can help to save lives and boost the health of entire regions. But some countries’ health governance infrastructures, management capacities, regulatory processes, and policy conditions are better equipped to utilize this private funding than others. What governance factors promote an investment-friendly environment for the private sector? And how can countries attract more private sector health financing?

On March 30, Governance Studies at Brookings hosted a panel of experts to discuss what conditions lead to good health governance and how those conditions affect a country’s ability to use private investments in health R&D. At the event, authors Darrell West and John Villasenor released their new paper, “Health governance capacity: Enhancing private sector investment in global health,” which examines 18 countries throughout Asia and sub-Saharan Africa. How compatible is each country’s health governance strategy with effective use of private investment in R&D?

Good health governance is a foundational condition for investment in the development of new drugs, vaccines, and diagnostics that play a vital role in global health. Investors in global health research and development are more likely to deploy capital in environments with fewer regulatory barriers, low or non-existent tariffs, and infrastructure and other factors that facilitate efficient market access.

To examine the quality of health governance, a team of researchers within the Center for Technology Innovation (CTI) at the Brookings Institution analyzed data from 18 low- and middle-income economies, including Bangladesh, China, Congo, Ethiopia, Ghana, India, Indonesia, Kenya, Liberia, Mozambique, Nigeria, Pakistan, Philippines, Sierra Leone, South Africa, Tanzania, Uganda, and Vietnam. For each of these countries, we used 25 indicators to assess health governance capacity in five categories: leadership and management capacity, policies, regulations, infrastructure and financing, and health systems. Each category was associated with a maximum score of 20, corresponding to a maximum aggregate score across all categories of 100.

The report shows that, of the 18 countries considered, Vietnam, South Africa and China demonstrated the strongest health governance capacity. Several factors propelled the leading countries to the top of the list. Among these three, all had strong performances on the health systems category. Vietnam scored especially well here, garnering a near-perfect score of 19 out of 20 and matching South Africa’s and Uganda’s regulations scores as the single highest in any given category.

Ghana also performed especially well, earning a score of 18 out of 20 on the leadership and management category. This was primarily driven by high scores on its governance capacity, as represented by indicators such as the Worldwide Governance Indicators Political Stability Index and Transparency International’s Corruption Perceptions Index.

The report provides several recommendations for creating a health governance environment conducive to investment in global health R&D. These includes improving transparency and strengthening management capacity, lowering (or eliminating) tariffs on medical products and expediting regulatory reviews of new drugs, investing in healthcare infrastructure, and increasing spending on healthcare in targeted ways.

A new study published as part of the Brookings Private Sector Global Health R&D Project examines the capacity of selected low- and middle-income nations to make effective use of external investment in global health research & development. The study assesses overall health governance capacity of 18 nations in sub-Saharan Africa and Asia by examining 25 indicators related to the five dimensions of management capacity, regulatory processes, health infrastructure and financing, health systems, and policy conditions in those countries.

The interactive scorecard below provides each country’s overall score and performance across the five dimensions. Click on a country’s name to view detailed scoring information across all 25 indicators.

Health Governance Capacity Index (HGCI)

About the study

Efforts to increase investment in global health traditionally focus on national governments and publicly funded multilateral aid organizations. Although the public sector is essential to the financing of medical research and development, non-governmental contributions have a large role to play as well. Given the proper environment—one in which it is clear that healthcare innovations will pass regulatory, policy, and legal muster—private sector financing can be a key source of investment in new medical treatments and preventions.

In “Health Governance Capacity: Enhancing Private Sector Investment in Global Health,” authors Darrell West, John Villasenor, and Jake Schneider examine the capacity of certain low- and middle-income nations to make effective use of external investment in global health R&D. “Good governance is a foundational condition for global health investment,” the authors write. “It conditions the overall environment in which both public and private sector health investment takes place.”

The researchers assess the overall health governance capacity of 18 nations in sub-Saharan Africa and Asia by examining 25 indicators related to the management capacity, regulatory processes, health infrastructure and financing, health systems, and policy conditions in those countries. Their key findings include:

Of the 18 countries studied, Vietnam, South Africa, China, and Ghana rank highest on the authors’ Health Governance Capacity Index (HGCI), indicating that these nations have a strong ability to attract and leverage private investment in health R&D.

Bangladesh, the Democratic Republic of the Congo, Pakistan, and Nigeria rank lowest on the HGCI. These nations received low scores on the dimensions of “Management Capacity” and “Health Systems,” indicating that targeted efforts to improve those areas could have a significant impact on their ability to absorb new investments relevant to global health goals.

In general, low- and middle-income countries can attract greater private investment in health R&D by increasing government transparency and stability, lowering tariffs on medical products, expediting the regulatory process for new drugs, investing in health infrastructure, and increasing government spending on health care in an efficient and targeted manner.

“By boosting private investment in global health R&D, the world can achieve even more impressive gains in personal well-being and economic growth,” the authors conclude in this, the first in a series of planned publications under the Brookings Private Sector Global Health R&D Project.

Access to affordable medication is an important global challenge, particularly in emerging economies. In these countries, a complex set of factors have long impeded development, deployment, and affordability of much needed drugs, vaccines and diagnostic tests. While there isn’t any single solution to this challenge, an important part of the overall solution lies in incentivizing investors and pharmaceutical companies to raise their investment in global health R&D.

A team of researchers in the Center for Technological Innovation at the Brookings Institution, in collaboration with researchers at the University of Washington’s Evans School of Public Policy and Governance, recently began a two-year project aimed at finding ways to address this investment shortfall. The project recognizes the need to complement the research on the social returns to global health R&D by examining the potential financial returns to private sector global health R&D investors, and offers policy solutions that can boost those returns.

To tackle this challenge, we will be using a multi-pronged approach.

One of the key issues we will be looking at is health governance capacity—the ability of a nation’s government and institutions to implement health policies, provide medical services, and respond to global health crises. We will focus specifically on a set of 18 countries in Sub-Saharan Africa and Asia, most of which are emerging economies, but some of them are not (e.g. China). Investments in global health R&D will only be effective if new developments can be effectively deployed in the places where they are needed. Infrastructure, economic and political stability, and the regulatory environment are some of the many factors that can maximize the benefit from global health R&D investments in a given country. We will analyze these factors and build an index, to be released in March 2017, that provides a holistic evaluation of the potential impact of global health R&D in each country. Our hope is that policymakers, pharmaceutical companies, regulators, and researchers will use the index to increase the scale and reach of global health R&D investments.

Next, we will publish a report on global health R&D spending in the summer of 2017. This analysis will build on the governance capacity findings by adding an overview of existing (largely public sector) global health R&D spending as well as a discussion of the implications of that spending within our focus countries.

In addition, we will use financial and economic modeling to identify new ways to encourage private sector investment in global health R&D. As part of this work, we plan to identify new structures to incentivize private sector global health R&D spending. For example, we will look at potential policy changes (such as enhancements to Priority Review Vouchers) that can lead to increased private investment. More broadly, we plan to model investment opportunities for a set of structures (including advanced market commitments, insurance markets, and financial prizes) that represent a significant private sector global health R&D investment opportunity. We expect to publish the results of this analysis in winter 2017-18.

Other components of this project include an analysis of household survey data from a Sub-Saharan African country to examine the impact of antiretroviral therapy on employment, hours worked, and educational attainment, an estimate of market size for particular drug treatments and possible financial returns to private investors in that country, and a literature review focused on private sector global health R&D investment.

Global health remains one of the most pressing global challenges. Public sector investment alone is not sufficient to meet global health R&D investment needs in the coming years. The private sector has the capacity to provide substantially increased investment in this sector, but can’t be expected to do so unless there is a strong case that those investment increases will be accompanied by strong economic returns.

This year’s financial inclusion week, focused on “Keeping Clients First in a Digital World,” enabled stakeholders around the world to explore salient questions surrounding the topic of advancing access to and usage of quality, affordable financial services among those who seek to use them. In this post, we explore several applications of digital technology for advancing inclusive finance and highlight four priority areas for “keeping clients first” in a rapidly evolving global financial ecosystem.

The theme of customer centricity with respect to digital finance is highly relevant to the Brookings Financial and Digital Inclusion Project (FDIP), which assesses country commitment to and progress toward engagement with digital and traditional financial services by underserved individuals. The 2015 and 2016 FDIP reports examined financial inclusion initiatives and financial service adoption rates across a geographically, politically, and economically diverse set of countries.

Both reports yielded good news regarding the global financial inclusion landscape: Many countries from across geographic and income spectrums are prioritizing financial inclusion as a national policy objective and are making progress toward their financial inclusion goals. Digital financial services have helped broaden and deepen engagement with financial services: For example, in countries such as Kenya and Rwanda, the proliferation of mobile phones and other digital tools have contributed to significant increases in financial inclusion.

Among other advantages, digital financial services can facilitate greater privacy for customers, reduce the likelihood of theft and leakages, enable lower costs for providers, and enhance affordability and convenience for customers. Digital technologies can also help individuals build credit histories by offering a wider range of tools aggregating and analyzing data, facilitating access to credit and other services among underserved customers.

The potential impact of digital finance on a global scale is considerable: A September 2016 report by the McKinsey Global Institute estimated that “widespread adoption and use of digital finance could increase the GDP of all emerging economies by 6 percent, or $3.7 trillion, by 2025.” Yet while digital financial services have captured the interest of stakeholders across the financial inclusion landscape, engagement with digital finance remains uneven across countries and demographic groups.

To facilitate the adoption of financial tools that meet the needs of underserved customers, policymakers, regulators, financial service providers, and other stakeholders should work together to advance four key principles:

2. Affordability

According to the 2014 Global Financial Inclusion (Global Findex) database, about 24 percent of men and 23 percent of women without accounts at a financial institution cited the cost of accounts as one of the reasons they had not opened an account. Yet while this finding suggests that affordability is a key component of promoting engagement with the formal financial ecosystem, data surrounding the pricing of digital products and services—as well as the costs associated with digital delivery channels (e.g., mobile phones)—are limited across countries.

Greater availability of data surrounding these indicators would better enable researchers, government entities, financial service providers, and other stakeholders to develop strategies to advance access to affordable financial services among underserved customers and target those strategies appropriately.

3. Utility

While facilitating the availability and affordability of financial services are key components of advancing financial inclusion, these criteria alone are not sufficient. Customers must also be able to leverage financial products and services in a way that ultimately promotes their financial health.

Facilitating usage of digital financial services is particularly challenging in areas where the digital ecosystem is not fully developed. For example, connectivity and liquidity issues and lack of acceptance of digital financial products among merchants can impede the adoption of formal financial services. Enabling merchants to explore digital payments at low or no cost, investing in digital infrastructure, and digitizing government-to-person payments can serve as incentives and conduits for strengthening the digital ecosystem.

Even where digital financial channels are fairly well-established, it is crucial to assess and clearly communicate the value those services might yield for various market segments. A recent report from the Center for Financial Inclusion at Accion highlights the importance of product design, consumer awareness, confidence in the financial system, and effective product delivery in helping ensure that customers are well-positioned to optimize their engagement with electronic payments.

4. Security

The issue of cybersecurity is a salient and arguably underexplored dimension of the shift toward digital financial services. One of the key concerns in the fintech space is that advances in connectivity are outpacing security. At the consumer level, investments in financial literacy can help mitigate some security concerns. From a policy and supply-side perspective, financial service providers (both traditional entities and fintech startups) and regulators must engage in ongoing dialogue to ensure adequate consumer protection and technical safeguards are in place.